164-Unit Closed in Phoenix, AZ!

Multi-Family and Apartment Investing
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164-Unit Closed in Phoenix, AZ!

Ben Leybovich
Rental Property Investor 路 Phoenix/Lima, Arizona/OH 路 Member since 2012 路 4k+ posts 路 4k+ votes

I am excited to announce the addition of Ridgepoint Apartments to our Phoenix portfolio. This is a wonderful, mid-80'es construction 164-unit. Original interiors will be upgraded, and the asset will be re-positioned. Yardi currently rates this location and improvements both as B-. Personally, I think as it sits, this is a Class C. When we are done with the re-positioning in 24 months, this will be a Class B, with Class A finishing surfaces. We anticipate being able to improve revenue by + or - $300 per door...huge value-add.

Huge thanks to my partner, @Sam Grooms for all of the work he continues to do. Huge admiration and gratitude to our entire team, and all of the folks who believe in our vision!

Ridgepoint, true to form, was yet again closed in under 45 days. This is our 3rd acquisition in 10 months, totaling $40M by purchase price. We are incredibly bullish on Phoenix for years to come!

Meeting our regional at the asset this morning - the work begins!

Feel free to reach out with questions, guys. I will lay out more of the details on the blog in coming weeks, but we can dig in here as well.

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Justin Hannah
Specialist 路 ID 路 Member since 2015 路 38 posts 路 23 votes
7y

this is awesome!  Thank you for always posting information on your deals. Are you bullish on Phoenix for all asset classes?

4Reply
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  • Ben Leybovich
    OP
    Rental Property Investor 路 Phoenix/Lima, Arizona/OH 路 Member since 2012 路 4k+ posts 路 4k+ votes
    7y
    Originally posted by @Stephen Akindona:

    Congrats @Ben Leybovich! I want to be like you when I grow up!

     Stephen, are you sure that you want to be like me? First, I'm not the sharpest tack in the box. Secondly, while I used to be a looker, I'm old now...

    You sure?

    0Reply
  • Stephen Akindona
    Investor 路 Memphis, TN 路 Member since 2013 路 741 posts 路 845 votes
    7y

    Lol!! @Ben Leybovich! You seem pretty smart to me, and your not old your seasoned! (Better way of saying one is old!) Lol

    0Reply
  • Ben Leybovich
    OP
    Rental Property Investor 路 Phoenix/Lima, Arizona/OH 路 Member since 2012 路 4k+ posts 路 4k+ votes
    7y

    @Stephen Akindona - seasoned. Yes! That's it :)

    0Reply
  • Victor S.
    WorldWide 路 Member since 2016 路 1k+ posts 路 1k+ votes
    6y

    looks like i'll be stalking your threads from now on... any updates on this one?

    0Reply
  • Sam Grooms
    Investor 路 Phoenix, AZ 路 Member since 2017 路 583 posts 路 919 votes
    6y

    @Victor S., we just got the reporting for December. Income is up $15K over November. November was up $15K over October.  

    As for the renovation, we added a new ramada/bbq area, added a dogpark, the playground is going in now, they just finished painting the property last week, and plans for the new office/gym have been submitted to the city and we expect to start that project the first week of March. 

    About two months ago, we took over the interior renovations from a third-party and hired our own crew. Our renovations are averaging 30 days, while the third-party was double that, with some units getting up to 90 days. Cutting down on that vacancy is a big reason for the increases in November and December. 

    We also cleaned house when we took over and evicted quite a few people. Sure it hurts for a month or two when you see income going down, but you have to believe in the plan and process.  Having better tenants in there has also contributed to the increases in November and December.

    We haven't even sent this to our partners/investors yet, but here's a graph of the income since we took over. 

    1Reply
  • Victor S.
    WorldWide 路 Member since 2016 路 1k+ posts 路 1k+ votes
    6y

    Very nice! Is the plan to complete the stabilization and sell or continue holding for foreseeable future?

    0Reply
  • Ben Leybovich
    OP
    Rental Property Investor 路 Phoenix/Lima, Arizona/OH 路 Member since 2012 路 4k+ posts 路 4k+ votes
    6y
    Originally posted by @Victor S.:

    Very nice! Is the plan to complete the stabilization and sell or continue holding for foreseeable future?

     We shall see, but most likely, yes.

    0Reply
  • Sam Grooms
    Investor 路 Phoenix, AZ 路 Member since 2017 路 583 posts 路 919 votes
    6y
    Originally posted by @Ben Leybovich:
    Originally posted by @Victor S.:

    Very nice! Is the plan to complete the stabilization and sell or continue holding for foreseeable future?

     We shall see, but most likely, yes.

    Ben, yes to both? 

    Victor, it depends. The IRR tells me to exit as soon as the property is stabilized. However, if big value add deals dry up when we're stabilized and there's not another asset to put our money into, it may be better to refinance, pull our money out, and hold onto it for cash flow. Sure, a big IRR is sexy and we can use it in our marketing, but you have to balance that with the equity multiple, other potential investments (or lack thereof), where you're at in the market cycle, and your investor's risk appetite (which changes throughout the project life-cycle, with the market).

    1Reply
  • Ben Leybovich
    OP
    Rental Property Investor 路 Phoenix/Lima, Arizona/OH 路 Member since 2012 路 4k+ posts 路 4k+ votes
    6y

    So, the office and gym are in the approval stage. But we've certainly made progress on CapEx:

    1Reply
  • Ben Leybovich
    OP
    Rental Property Investor 路 Phoenix/Lima, Arizona/OH 路 Member since 2012 路 4k+ posts 路 4k+ votes
    6y
    Originally posted by @Sam Grooms:
    Originally posted by @Ben Leybovich:
    Originally posted by @Victor S.:

    Very nice! Is the plan to complete the stabilization and sell or continue holding for foreseeable future?

     We shall see, but most likely, yes.

    Ben, yes to both? 

    Victor, it depends. The IRR tells me to exit as soon as the property is stabilized. However, if big value add deals dry up when we're stabilized and there's not another asset to put our money into, it may be better to refinance, pull our money out, and hold onto it for cash flow. Sure, a big IRR is sexy and we can use it in our marketing, but you have to balance that with the equity multiple, other potential investments (or lack thereof), where you're at in the market cycle, and your investor's risk appetite (which changes throughout the project life-cycle, with the market).

    Samuel, of course, yes to both. We will sell if that works best, and we will hold if that works best.

    You see, Samuel, when you are Ben Leybovich, you' get to be ambiguous. Some folks will think its thought-provoking and insightful, while others think I am a pompous jack ***. 

    Both perspectives evoke emotion and cause publicity, which is never a bad thing... LOL

    0Reply
  • Jerry M Cutrona
    Developer 路 Member since 2018 路 29 posts 路 10 votes
    6y

    Curious about the main deal points offered to your equity investors when raising capital. Different payout / exit structures?

    0Reply
  • Ben Leybovich
    OP
    Rental Property Investor 路 Phoenix/Lima, Arizona/OH 路 Member since 2012 路 4k+ posts 路 4k+ votes
    6y
    Originally posted by @Jerry M Cutrona:

    Curious about the main deal points offered to your equity investors when raising capital. Different payout / exit structures?

    Jerry, our hurdles for value-add deals are:

    2x on 5-year hold, and about 2.7+x on a 10-year hold

    17-18 IRR on a 5-year hold, and 14-15 IRR on a 10-year hold

    8% cumulative pref

    70/30 split

    0Reply
  • Jerry M Cutrona
    Developer 路 Member since 2018 路 29 posts 路 10 votes
    6y

    Jerry, our hurdles for value-add deals are:

    2x on 5-year hold, and about 2.7+x on a 10-year hold

    17-18 IRR on a 5-year hold, and 14-15 IRR on a 10-year hold

    8% cumulative pref

    70/30 split

    Generous....

    Should have little trouble raising equity/interest. Of course, track record plays a huge part for your investors security perspective, I'm sure.

    Thanks for sharing.

    Ben Leybovich

    0Reply
  • Shiyan Cao
    Investor 路 Bay Area, CA 路 Member since 2020 路 11 posts 路 15 votes
    6y

    @Ben Leybovich

    Congratulation on closing the deal! can you share the top 3 reasons why you choose Phoenix AZ over other popular places (TX, GA, etc)?

    0Reply
  • Ben Leybovich
    OP
    Rental Property Investor 路 Phoenix/Lima, Arizona/OH 路 Member since 2012 路 4k+ posts 路 4k+ votes
    6y
    Originally posted by @Jerry M Cutrona:

    Jerry, our hurdles for value-add deals are:

    2x on 5-year hold, and about 2.7+x on a 10-year hold

    17-18 IRR on a 5-year hold, and 14-15 IRR on a 10-year hold

    8% cumulative pref

    70/30 split

    Generous....

    Should have little trouble raising equity/interest. Of course, track record plays a huge part for your investors security perspective, I'm sure.

    Thanks for sharing.

    Ben Leybovich

    We bought 4 communities last year. Raised about $20M. This model is very appealing to investors because of one class of shares, which means everyone is treated the same, and the cumulative nature of the pref. 

    0Reply
  • Ola Dantis
    Multifamily Syndicator 路 Houston, TX 路 Member since 2016 路 1k+ posts 路 2k+ votes
    6y

    Oh, this was 7 months ago?!!! I was about to say 2 closings in 1 month? 馃槼 

    Congrats @Ben Leybovich

    1Reply
  • Ben Leybovich
    OP
    Rental Property Investor 路 Phoenix/Lima, Arizona/OH 路 Member since 2012 路 4k+ posts 路 4k+ votes
    6y
    Originally posted by @Shiyan Cao:

    @Ben Leybovich

    Congratulation on closing the deal! can you share the top 3 reasons why you choose Phoenix AZ over other popular places (TX, GA, etc)?

    Population Growth

    Job Growth

    Timing in the RE Cycle 

    1Reply
  • Sam Grooms
    Investor 路 Phoenix, AZ 路 Member since 2017 路 583 posts 路 919 votes
    6y
    Originally posted by @Ben Leybovich:
    Originally posted by @Shiyan Cao:

    @Ben Leybovich

    Congratulation on closing the deal! can you share the top 3 reasons why you choose Phoenix AZ over other popular places (TX, GA, etc)?

    Population Growth

    Job Growth

    Timing in the RE Cycle 

    Shiyan, to elaborate on Ben's message, Phoenix is in the top 3 in rent growth, population growth, and job growth. No market can compete on those fundamentals. It's also a lot easier to underwrite operating expenses in Phoenix. A big variable is usually property taxes. However, we have a law here that limits your tax increase per year to 5% (there are some other items that can trigger an exception, but they're easy to avoid). So we just underwrite a 5% increase every year and call it a day. Lastly, proximity. Ben and I both live in Phoenix MSA. I can get to any of our properties in 25 minutes. We know the submarkets well and can fine tune our underwriting moreso than someone across the country. 

    To summarize:

    1. Phoenix is #1 in multifamily fundamentals

    2. Limitation on property tax increases

    3. Proximity for us

    1Reply
  • Shiyan Cao
    Investor 路 Bay Area, CA 路 Member since 2020 路 11 posts 路 15 votes
    6y
    Originally posted by @Sam Grooms:
    Originally posted by @Ben Leybovich:
    Originally posted by @Shiyan Cao:

    @Ben Leybovich

    Congratulation on closing the deal! can you share the top 3 reasons why you choose Phoenix AZ over other popular places (TX, GA, etc)?

    Population Growth

    Job Growth

    Timing in the RE Cycle 

    Shiyan, to elaborate on Ben's message, Phoenix is in the top 3 in rent growth, population growth, and job growth. No market can compete on those fundamentals. It's also a lot easier to underwrite operating expenses in Phoenix. A big variable is usually property taxes. However, we have a law here that limits your tax increase per year to 5% (there are some other items that can trigger an exception, but they're easy to avoid). So we just underwrite a 5% increase every year and call it a day. Lastly, proximity. Ben and I both live in Phoenix MSA. I can get to any of our properties in 25 minutes. We know the submarkets well and can fine tune our underwriting moreso than someone across the country. 

    To summarize:

    1. Phoenix is #1 in multifamily fundamentals

    2. Limitation on property tax increases

    3. Proximity for us

     Thanks for sharing, Sam. Proximity to hot market is a big advantage IMO. Just curious what would you do if you live in a pricy and not so well market. Would you choose long distance? 

    1Reply
  • Sam Grooms
    Investor 路 Phoenix, AZ 路 Member since 2017 路 583 posts 路 919 votes
    6y
    Originally posted by @Shiyan Cao:
    Originally posted by @Sam Grooms:
    Originally posted by @Ben Leybovich:
    Originally posted by @Shiyan Cao:

    @Ben Leybovich

    Congratulation on closing the deal! can you share the top 3 reasons why you choose Phoenix AZ over other popular places (TX, GA, etc)?

    Population Growth

    Job Growth

    Timing in the RE Cycle 

    Shiyan, to elaborate on Ben's message, Phoenix is in the top 3 in rent growth, population growth, and job growth. No market can compete on those fundamentals. It's also a lot easier to underwrite operating expenses in Phoenix. A big variable is usually property taxes. However, we have a law here that limits your tax increase per year to 5% (there are some other items that can trigger an exception, but they're easy to avoid). So we just underwrite a 5% increase every year and call it a day. Lastly, proximity. Ben and I both live in Phoenix MSA. I can get to any of our properties in 25 minutes. We know the submarkets well and can fine tune our underwriting moreso than someone across the country. 

    To summarize:

    1. Phoenix is #1 in multifamily fundamentals

    2. Limitation on property tax increases

    3. Proximity for us

     Thanks for sharing, Sam. Proximity to hot market is a big advantage IMO. Just curious what would you do if you live in a pricy and not so well market. Would you choose long distance? 

    Yes. Don't get me wrong, I know plenty of people that invest in the Bay Area and do really well. If I lived there, I would probably just invest in that area. However, when you start taking other people's money, you have to be more cautious and conservative. For me, good market fundamentals are a requirement to take other people's money. 

    3Reply
  • Bill Zahller
    Investor 路 Asheville, NC 路 Member since 2016 路 68 posts 路 39 votes
    6y

    Congratulations @Ben Leybovich It sounds like a good project.

    0Reply
  • Ben Leybovich
    OP
    Rental Property Investor 路 Phoenix/Lima, Arizona/OH 路 Member since 2012 路 4k+ posts 路 4k+ votes
    6y
    Originally posted by @Shiyan Cao:
    Originally posted by @Sam Grooms:
    Originally posted by @Ben Leybovich:
    Originally posted by @Shiyan Cao:

    @Ben Leybovich

    Congratulation on closing the deal! can you share the top 3 reasons why you choose Phoenix AZ over other popular places (TX, GA, etc)?

    Population Growth

    Job Growth

    Timing in the RE Cycle 

    Shiyan, to elaborate on Ben's message, Phoenix is in the top 3 in rent growth, population growth, and job growth. No market can compete on those fundamentals. It's also a lot easier to underwrite operating expenses in Phoenix. A big variable is usually property taxes. However, we have a law here that limits your tax increase per year to 5% (there are some other items that can trigger an exception, but they're easy to avoid). So we just underwrite a 5% increase every year and call it a day. Lastly, proximity. Ben and I both live in Phoenix MSA. I can get to any of our properties in 25 minutes. We know the submarkets well and can fine tune our underwriting moreso than someone across the country. 

    To summarize:

    1. Phoenix is #1 in multifamily fundamentals

    2. Limitation on property tax increases

    3. Proximity for us

     Thanks for sharing, Sam. Proximity to hot market is a big advantage IMO. Just curious what would you do if you live in a pricy and not so well market. Would you choose long distance? 

     You couldn't get me to buy in CA if you put a gun to my head...

    0Reply
  • Sam Grooms
    Investor 路 Phoenix, AZ 路 Member since 2017 路 583 posts 路 919 votes
    6y
    Originally posted by @Ben Leybovich:
    Originally posted by @Shiyan Cao:
    Originally posted by @Sam Grooms:
    Originally posted by @Ben Leybovich:
    Originally posted by @Shiyan Cao:

    @Ben Leybovich

    Congratulation on closing the deal! can you share the top 3 reasons why you choose Phoenix AZ over other popular places (TX, GA, etc)?

    Population Growth

    Job Growth

    Timing in the RE Cycle 

    Shiyan, to elaborate on Ben's message, Phoenix is in the top 3 in rent growth, population growth, and job growth. No market can compete on those fundamentals. It's also a lot easier to underwrite operating expenses in Phoenix. A big variable is usually property taxes. However, we have a law here that limits your tax increase per year to 5% (there are some other items that can trigger an exception, but they're easy to avoid). So we just underwrite a 5% increase every year and call it a day. Lastly, proximity. Ben and I both live in Phoenix MSA. I can get to any of our properties in 25 minutes. We know the submarkets well and can fine tune our underwriting moreso than someone across the country. 

    To summarize:

    1. Phoenix is #1 in multifamily fundamentals

    2. Limitation on property tax increases

    3. Proximity for us

     Thanks for sharing, Sam. Proximity to hot market is a big advantage IMO. Just curious what would you do if you live in a pricy and not so well market. Would you choose long distance? 

     You couldn't get me to buy in CA if you put a gun to my head...

     Now, Benjamin. I'm sure you'd choose to live in that scenario. 

    0Reply
  • Ben Leybovich
    OP
    Rental Property Investor 路 Phoenix/Lima, Arizona/OH 路 Member since 2012 路 4k+ posts 路 4k+ votes
    6y
    Originally posted by @Bill Zahller:

    Congratulations @Ben Leybovich It sounds like a good project.

    It's going well so far, Bill. We've had it for 6 months. The seller's T12 prior to sale had GI of $132,000. We never saw that nor expected to see that. Starting at $120,000 we dipped to $114,000 by month 3 before reversing.

    The cleaning of this house was as fierce as any I've done. By the 3rd month, we gad close to 40 vacant units in a 164-unit community, and work orders North of 100, so the R&M and Labor was through the roof.

    We got through the glut and the income started to climb - $135,000 and now in month 6 $150,000. Got control of OpEx, and in fact even though we spiked in the first 3 months, over the 6 months annualized we are running about $100 per door under the underwriting.

    We've got no vacancy at this point. 18 units have been renovated and 17 of them are rented at the renovated market which is about $300 higher than in-place.

    1Reply
  • Ben Leybovich
    OP
    Rental Property Investor 路 Phoenix/Lima, Arizona/OH 路 Member since 2012 路 4k+ posts 路 4k+ votes
    6y
    Originally posted by @Sam Grooms:
    Originally posted by @Ben Leybovich:
    Originally posted by @Shiyan Cao:
    Originally posted by @Sam Grooms:
    Originally posted by @Ben Leybovich:
    Originally posted by @Shiyan Cao:

    @Ben Leybovich

    Congratulation on closing the deal! can you share the top 3 reasons why you choose Phoenix AZ over other popular places (TX, GA, etc)?

    Population Growth

    Job Growth

    Timing in the RE Cycle 

    Shiyan, to elaborate on Ben's message, Phoenix is in the top 3 in rent growth, population growth, and job growth. No market can compete on those fundamentals. It's also a lot easier to underwrite operating expenses in Phoenix. A big variable is usually property taxes. However, we have a law here that limits your tax increase per year to 5% (there are some other items that can trigger an exception, but they're easy to avoid). So we just underwrite a 5% increase every year and call it a day. Lastly, proximity. Ben and I both live in Phoenix MSA. I can get to any of our properties in 25 minutes. We know the submarkets well and can fine tune our underwriting moreso than someone across the country. 

    To summarize:

    1. Phoenix is #1 in multifamily fundamentals

    2. Limitation on property tax increases

    3. Proximity for us

     Thanks for sharing, Sam. Proximity to hot market is a big advantage IMO. Just curious what would you do if you live in a pricy and not so well market. Would you choose long distance? 

     You couldn't get me to buy in CA if you put a gun to my head...

     Now, Benjamin. I'm sure you'd choose to live in that scenario. 

     Samuel, this is why we don't place

    investor capital in CA.

    0Reply
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